Lloyds TSB takes mortgage weight off Northern Rock's shoulders

06 June 2008 / by Rebecca Sargent

In today's announcement, Lloyds TSB revealed that selected Northern Rock customers who are coming to the end of their fixed rate mortgage deals will be encouraged to switch to a Lloyds TSB mortgage.

Northern Rock became nationalised in February this year after hitting liquidity problems as a result of sub-prime mortgage lending. Since then, the bank has been eager to reduce the size of its bulging loan book.

The deal between Northern Rock and Lloyds TSB is set to last for three years and selected customers will benefit from a fast-track application process. Lloyds TSB is also planning to waiver the usual £99 application fee and offer free legal and valuation work as it does for existing customers.

Northern Rock has reportedly claimed that the move will safeguard 100 jobs because staff will be needed to run the dedicated switching service, which is set to be up and running within a month.

The deal is expected to be open to Northern Rock customers who have at least a 20 per cent deposit and a clean repayment history. According to Lloyds TSB, the move will allow the bank – which already has an 8.5 per cent share of the mortgage market – to accelerate new business growth in a low-risk manner whilst assisting Northern Rock towards its goal of slashing its debt.

Commenting on the development, Helen Weir, Lloyds TSB, said: "This transaction is great news for all parties involved and is an innovative example of how we continue to deliver on our organic growth strategy and maintain the high quality of our mortgage book.

"The agreement offers Northern Rock customers a fast-track process to switch mortgage providers. Crucially, it will greatly reduce the uncertainty involved for customers who choose to switch providers and gives them peace of mind in the current uncertain market conditions." She added.